There used to be a time when the only way consumers could gather data on homes was by making a visit to their local real estate office. Upon walking through the door they would be greeted by a real estate agent and all the listings that firm had in their inventory would be available for their viewing. That world no longer exist as the internet has disrupted the real estate brokerage industry in a major way and not only do consumers no longer have to visit a real estate firm to gather the information they seek they also don’t feel a connection with any of the major real estate brands.
Instead buyers and sellers are flocking to websites such as Zillow, Realtor.com, and Redfin to name a few. As a result, these internet companies have completely taken over the mind share of the consumer and when someone thinks of buying or selling they think of going onto one of these sites to find out information about their home, their neighborhood of interest, or to get linked up with an agent.
Redfin, just went public last week, and along with Zillow and Realtor.com, not only do they have the attention of the consumer they also have a bucket load of cash, and thousands of agents who sign up for their advertising fees and referral programs in order to serve buyers and sellers who inquire about property. This begs the question, are traditional real estate firms dead? Maybe not today but in the not too distance future?
Two things traditional real estate firms, such as Remax and Century 21, used to monopolize was information and access to a real estate agent to help buyers buy and sellers sell. But today that information has been hijacked by the big three, made easier to understand, then showcased to the consumer. Additionally, customers can simply click a button and get a phone call from an agent within seconds. Then they can find themselves touring a home within hours after that phone call.
To take this a few steps further, many large and small firms now also depend on the technology of these companies in order to keep their doors open. Does this simply mean that traditional real estate firms are doing good business with Zillow and the rest or are they slowly being replaced by an entity that is currently connecting with the consumer in a smarter and faster way but steadily making the traditional real estate brokerage obsolete?
If Redfin begins to increase their market share of listings across the country or Zillow and Realtor.com finally decide to jump into the brokerage business (as Redfin already has) one might be able to see a quick death for the traditional firms who’ve refused to think outside the box about new and improved ways to reach the market. Money spent on technology is often an attempt to recruit more agents as opposed to finding new buyers and sellers or building tools and services that consumers want and need. I think it’s fair to say that many real estate firms have failed to think of ways that can lead them to doing better business and as a result competitors, posing as friends, are finding ways to put them out of business.
Zillow has publicly stated that it has no intention of going into the brokerage business, but plans can change. Now that Zillow essentially has their hand in every part of the real estate transaction with the purchases of Dotloop (transaction management and e-signatures), Diverse Solutions (IDX provider), Market Leader (CRM), Postlets (listing advertising), and search portals such as Zillow, Trulia, StreetEasy, and Hotpads it appears that it’s only a matter of time before those plans may very well change.
Of course, firms have no one else to blame but themselves. Zillow, Realtor.com, and Redfin wouldn’t exist if real estate companies never agreed to have their information given out. This is the cost firms pay for not innovating. If you don’t evolve someone else will and Zillow, Realtor.com, and Redfin don’t have to replace agents (that’s too difficult to do) they only have to replace the brokerages. Real estate is still a local business that requires local knowledge but if the tools and technology made available by these internet companies, and if a player like Zillow actually did decide to become a brokerage, what would keep agents from hopping ship faster than someone can say “wait there’s more!”
Unless Zillow and Realtor.com decide to essentially remain internet companies, Redfin is already a real estate brokerage, then the traditional real estate firms appear to be “safe” for the time being. However, it is abundantly clear that the market has changed and the takeover seems to be underway.